Treasury Laws Amendment (2018 Measures No 1) Bill [2018] AUSStaCSBSD 39 (14 February 2018)

• Treasury Laws Amendment (2018 Measures No. 1) Bill
• Power for delegated legislation to amend primary legislation (Henry VIII clause)113
• Strict liability offence117

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Treasury Laws Amendment (2018 Measures No. 1) Bill

Purpose	This bill seeks to amend Acts relating to superannuation, corporations and taxation and to repeal certain Acts and provisions of Acts Schedule 1 makes a number of regulatory amendments to Treasury portfolio Acts Schedule 2 extends the tax relief for merging superannuation funds until 1 July 2020 Schedule 3 enables recovery of the ongoing cost of the governance of the superannuation transaction network from the superannuation supervisory levy Schedule 4 transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare to the Commissioner of Taxation Schedule 5 requires purchasers of new residential premises and new subdivisions of potential residential land to make a payment of part of the purchase price to the Australian Taxation Office
Portfolio	Treasury
Introduced	House of Representatives on 7 February 2018

Power for delegated legislation to amend primary legislation (Henry VIII clause)^[113]

1.143 Schedule 5 to the bill seeks to establish a framework to prevent certain forms of tax evasion (relating to goods and services tax) by property developers. Within that framework, purchasers of new residential property and subdividers of residential land would be required to withhold a certain amount of the purchase price from the seller, and to pay that amount directly to the Australian Taxation Office (ATO). This is referred to as a 'withholding obligation'. The sellers of the property or land would subsequently be able to apply for a tax credit in respect of the amount withheld.

1.144 To implement the withholding obligation, proposed subsection 14-250(1) seeks to require a person who is the recipient of a taxable supply^[114] that is, or that includes, a supply to which proposed subsection 14-250(2) applies, to pay to the Commissioner of Taxation (Commissioner) a certain amount.^[115] Proposed subsection 14-250(2) applies to the supply, by way of sale or long-term lease, of new residential premises and potential residential land, other than supplies of a kind determined by the Commissioner under proposed subsection 14-250(3). Proposed subsection 14‑250(3) then provides that the Commissioner may, by legislative instrument, determine that proposed subsection 14-250(2) (and therefore the obligation in proposed subsection 14-250(1)) does not apply to a kind of supply specified in the determination. Proposed subsection 14-250(3) therefore appears to allow delegated legislation (the Commissioner's determination) to amend the operation of primary legislation.

1.145 A provision that enables delegated legislation to amend the operation of primary legislation is known as a Henry VIII clause. There are significant scrutiny concerns with enabling delegated legislation to override the operation of legislation which has been passed by Parliament as such clauses impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the executive. As such, the committee expects a sound justification for the use of a Henry VIII clause to be provided in the explanatory memorandum.

1.146 In this instance, the explanatory memorandum only provides that the power of the Commissioner to override the operation of the withholding obligation by legislative instrument has been included '[t]o avoid any unintended consequences.'^[116] The explanatory memorandum does not provide any further explanation, nor does it include examples of circumstances in which the power would be used. Given the apparent significance of the withholding obligation to the anti-evasion measures sought to be introduced by Schedule 5 to the bill, the committee does not consider this to sufficiently explain or justify the inclusion of a Henry VIII clause. In this regard, the committee also notes that the bill does not appear to provide any limitations on the power to make determinations under proposed subsection 14‑250(3). For example, it does not set out any criteria that must be satisfied.

1.147 The committee seeks the minister's more detailed justification as to why it is proposed to allow the Commissioner to determine, by legislative instrument, that the withholding obligation does not apply to certain kinds of supply.

1.148 The committee also seeks the minister's advice as to the appropriateness of amending the bill to insert (at least high-level) guidance concerning the making of a determination under proposed subsection 14-250(3).

Strict liability offence^[117]

1.149 Proposed subsection 14-255(1) seeks to require a person who makes a supply, by way of sale or long-term lease, of residential premises or potential residential land, to give to the recipient of that supply a notice stating the matters set out in proposed paragraphs 14-255(1)(a) and (b). Subsection 14-255(4) seeks to create the offence of failing to give a notice required under proposed section 14‑255, punishable by 100 penalty units. Subsection 14-255(5) states that this offence is to be one of strict liability.

1.150 Under general principles of the criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[118] In this instance, the explanatory memorandum states:

Strict liability is appropriate in this case because the offence is committed by failing to make the required representations. It is important for the integrity of the regulatory regime to make suppliers responsible for a failure to provide an accurate notice, regardless of their intentions. Withholding is being introduced to address non-compliance by certain suppliers and it would undermine the effectiveness of the regime if suppliers could knowingly fail to provide a notice when required without consequences. Suppliers have clear notice about their obligations and the matters covered in the notice are either known or readily able to be determined by the supplier.^[119]

1.151 The committee notes this detailed explanation as to the appropriateness of applying strict liability to the offence in proposed subsection 14-255(4). However, the committee also notes that the Guide to Framing Commonwealth Offences states that the application of strict liability is only considered appropriate where the relevant offence is not punishable by imprisonment and is only punishable by a fine of up to 60 penalty units for an individual.^[120] In this instance, the bill proposes applying strict liability to an offence punishable by 100 penalty units. The explanatory memorandum states:

This penalty creates a strong disincentive for potential phoenix companies [that is, companies which dissolve to avoid tax liability] to misrepresent that a property is not 'new residential premises' or 'potential residential land' to avoid the withholding obligation from applying. The penalty amount is set having regard to the significant sums of money involved in such real property transactions. Without a strong disincentive, phoenix operators may not be discouraged from making such a false representation.^[121]

1.152 While noting this explanation, the committee remains concerned about the application of strict liability in circumstances where a penalty exceeds the maximum penalty recommended by the Guide to Framing Commonwealth Offences.

1.153 The committee draws its scrutiny concerns to the attention of senators, and leaves to the Senate as a whole the appropriateness of applying strict liability to the offence in proposed subsection 14-255(4), which carries a penalty of 100 penalty units.

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[113] Schedule 5, item 1, proposed subsection 14-250(3). The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv) and (v).

[114] 'Taxable supply' is defined in Subdivision 9-A of the A New Tax System (Goods and Services Tax) Act (GST Act). Section 9-5 of that Act provides that a person makes a taxable supply if they are registered (or required to be registered) under the GST Act, they make a supply for consideration (e.g. payment), the supply is made in the course or furtherance of an enterprise that the person carried on, and the supply is connected with the indirect tax zone.

[115] Under proposed section 14-250, the amount to be paid to the Commissioner is seven per cent of the contract price for the relevant supply, or the price for the relevant supply. The Commissioner may, by legislative instrument, raise that amount to up to nine per cent.

[116] Explanatory memorandum, p. 51.

[117] Schedule 5, item 1, proposed subsection 14-255(4). The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i).

[118] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[119] Explanatory memorandum, p. 57.

[120] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 23.

[121] Explanatory memorandum, p. 58.